Modern Slavery is broadly a term covering slavery, forced labour, servitude and human trafficking. It has been described as “the great human rights issue of our time” by Theresa May.
The Modern Slavery Act 2015 was introduced as part of an effort to tackle the issue by imposing a requirement on every large business carrying on any part of its business in the UK (including companies registered abroad but which engage in commercial activities in the UK) having a total annual turnover of £36m or more to produce a slavery and human trafficking statement for each financial year of the organisation. ‘Turnover’ means the turnover of that organisation and the turnover of any of its subsidiaries. Groups can make one statement but may have to post this on several websites depending on how complex their business is.
The Modern Slavery Act statements must set out what companies are doing to identify and mitigate risks of modern slavery taking place within their company and in their supply chains.
For more details on the corporate reporting requirements under the Modern Slavery Act, please refer to the October 2015 blog posted by our Employment team.
A large number of Real Estate companies are affected by the reporting requirements:
- Investors using companies incorporated outside the UK that own UK investment properties having a turnover of at least £36 million will have to comply (taking subsidiaries into account for the turnover calculation).
- Landlords and their asset managers need to think which of their contracts (or sub-contracts) might be sensitive and the examples we can think of will be cleaning companies or the employment of agency staff.
- Even where a managing agent does not itself have an obligation to report because of the size of its business, it may receive requests for information regarding its anti-slavery practices.
- Tenants must also be aware that landlords form part of their supply chains on the basis that landlords supply them with services so may require information each year and may request ongoing compliance covenants in their leases
- There is a lot of publicity already about the need for the construction sector to be aware of the strong risks of exploitation of labour which exist in their supply chains.
A year has passed since the Act came into force and the reporting has been criticised in some areas for not going far enough towards tackling modern slavery.
Our Employment team’s most recent post reports that companies tended to explain their structures and policies covering modern slavery well, but failed to adequately describe the practical measures being taken to assess their effectiveness. Examples of statements published by Real Estate companies corroborate this.
It was also found that contractor relationships are a key omission from statements. For the Real Estate sector, and particularly in the context of the contractor and sub-contractor relationships mentioned above, these clearly will be key points to be addressed.
The negative conclusions coming from the research into these initial company reports are not unexpected given that most companies are still attempting to find the most effective ways of reporting and many lack sufficient resources to conduct due diligence and to support supplier improvements to tackle the issue.
Be aware that changes to the legislation to make it stricter are already pending and Real Estate companies will need to ensure that they are adequately aware of their increasing obligations.